Professional Documents
Culture Documents
TRANSNATIONAL
CORPORATIONS
United Nations
New York and Geneva, 2005
United Nations Conference on Trade and Development
Division on Investment, Technology and Enterprise Development
Editorial statement
Transnational Corporations (formerly The CTC Reporter) is a refereed
journal published three times a year by UNCTAD. In the past, the Programme on
Transnational Corporations was carried out by the United Nations Centre on
Transnational Corporations (1975-1992) and by the Transnational Corporations
and Management Division of the United Nations Department of Economic and
Social Development (1992-1993). The basic objective of this journal is to publish
articles and research notes that provide insights into the economic, legal, social
and cultural impacts of transnational corporations in an increasingly global economy
and the policy implications that arise therefrom. It focuses especially on political
and economic issues related to transnational corporations. In addition, Transnational
Corporations features book reviews. The journal welcomes contributions from
the academic community, policy makers and staff members of research institutions
and international organizations. Guidelines for contributors are given at the end of
this issue.
Acting Editor: Anne Miroux
Deputy editor: Joerg Weber
Associate editor: Shin Ohinata
Production manager: Tess Sabico
Guest editor for special feature on voluntary codes of conduct
for transnational corporations: S. Prakash Sethi
home page: http://www.unctad.org/TNC
Subscriptions
A subscription to Transnational Corporations for one year is US$ 45
(single issues are US$ 20). See p. 211 for details of how to subscribe, or
contact any distributor of United Nations publications. United Nations,
Sales Section, Room DC2-853, 2 UN Plaza, New York, NY 10017, United
States – tel.: 1 212 963 3552; fax: 1 212 963 3062; e-mail: publications@un.org;
or Palais des Nations, 1211 Geneva 10, Switzerland – tel.: 41 22 917 1234; fax:
41 22 917 0123; e-mail: unpubli@unog.ch.
Note
The opinions expressed in this publication are those of the authors and
do not necessarily reflect the views of the United Nations. The term
“country” as used in this journal also refers, as appropriate, to territories or
areas; the designations employed and the presentation of the material do
not imply the expression of any opinion whatsoever on the part of the
Secretariat of the United Nations concerning the legal status of any country,
territory, city or area or of its authorities, or concerning the delimitation of
its frontiers or boundaries. In addition, the designations of country groups
are intended solely for statistical or analytical convenience and do not
necessarily express a judgement about the stage of development reached by
a particular country or area in the development process.
Unless stated otherwise, all references to dollars ($) are to United States
dollars.
ISBN 92-1-112693-2
ISSN 1014-9562
Copyright United Nations, 2005
All rights reserved
Printed in Switzerland
ii
Board of Advisers
CHAIRPERSON
John H. Dunning, Emeritus Esmee Fairbairn Professor of International Investment
and Business Studies, University of Reading, United Kingdom, and Emeritus State
of New Jersey Professor of International Business, Rutgers University, United
States
MEMBERS
V.N. Balasubramanyam, Professor of Development Economics, Lancaster
University, United Kingdom
Edward K. Y. Chen, President, Lingnan College, Hong Kong, Special
Administrative Region of China
Farok J. Contractor, Professor, Rutgers Business School, United Kingdom
Arghyrios A. Fatouros, Professor of International Law, Faculty of Political
Science, University of Athens, Greece
Xian Guoming, Professor of Economics and International Business, Director,
Center for Transnationals Studies, Dean, Teda College of Nankai University,
Tianjin, China.
Kamal Hossain, Senior Advocate, Supreme Court of Bangladesh, Bangladesh
Celso Lafer, Professor, University of Sao Paulo, Brazil
James R. Markusen, Professor of Economics, University of Colorado at Boulder,
Colorado, United States.
Theodore H. Moran, Karl F. Landegger Professor, and Director, Program in
International Business Diplomacy, School of Foreign Service, Georgetown
University, Washington, D.C., United States
Sylvia Ostry, Chairperson, Centre for International Studies, University of Toronto,
Toronto, Canada
Terutomo Ozawa, Professor of Economics, Colorado State University, Fort
Collins, Colorado, United States
Tagi Sagafi-nejad, Radcliffe Killam Distinguished Professor of International
Business, and Director, Ph.D. Program in International Business Administration,
College of Business Administration, Texas A&M International University, Texas,
United States
Mihály Simai, Professor Emeritus, Institute for World Economics, Budapest,
Hungary
John M. Stopford, Professor Emeritus, London Business School, London, United
Kingdom
Osvaldo Sunkel, Professor and Director, Center for Public Policy Analysis,
University of Chile, Santiago, Chile
Marjan Svetli1 i 1, Head, Centre of International Relations, Faculty of Social
Sciences, University of Ljubljana, Slovenia
Daniel Van Den Bulcke, Professor of International Management and
Development, University of Antwerp, Belgium
iii
Transnational Corporations
Volume 14, Number 3, December 2005
Contents
Page
ARTICLES
RESEARCH NOTE
v
SPECIAL ISSUE
Voluntary codes of conduct for
transnational corporations
vii
Another outcome of this state of affairs has been that national
governments in developing countries are competing among
themselves to attract and maintain foreign direct investment (FDI)
undertaken by TNCs, including by making concessions to TNCs
in terms of tax and other “give aways”, thereby limiting their ability
to fashion domestic policies with a better focus on their national
interest.
TNCs can exert tremendous influence by creating a new
equilibrium in economic and political power. However, they have
been unwilling to do so for reasons of self-interest. Unlike in the
earlier waves of globalization, where the expansion of TNC power
and influence were viewed with distrust, in the current wave of
globalization TNCs are viewed as positive instruments of growth
and change. Any effort to constrain their conduct is viewed as
undesirable.
This situation appears unsustainable. Nature abhors power
vacuum and disequilibrium. Recognition of this situation has led
TNCs and other societal stakeholders to find interim solutions that
would narrow the imbalance between the influence and power of
TNCs and those of nation states.
One approach to handling this issue has been the development
of voluntary codes of conduct created by TNCs individually, and
industry groups collectively. These codes reflect a set of
undertakings that their sponsors promise to implement with a view
to addressing some of the real or perceived societal concerns
associated with or emanating from TNC conduct. This development
is still in a nascent stage and the jury is still out as to its viability
over the long run. TNCs prefer this approach because it allows
them to project and magnify their efforts at a minimum cost and
changes in their modus vivendi. It is also for these very reasons
that TNC critics view them with skepticism.
The three papers presented here provide a composite picture
for the reader as to the current state of usage of voluntary codes of
conduct. They also point to their internal structurally-oriented
strengths and weaknesses and what can be expected of them under
the best and worst of circumstances. The authors of the papers
recognize that for the foreseeable future voluntary codes of conduct
provide the most feasible approach to directing TNC conduct, which
viii
would be acceptable to larger elements of society while avoiding
imposition of heavy compliance burdens on TNCs that would be
economically unjustified or socially undesirable, and would be
unlikely to be acceptable to the TNCs. They also point to a number
of definitions in the code creation and implementation as currently
practiced by TNCs and industry groups. Finally, they indicate
certain approaches that would be needed on the part of the codes
sponsors so as to make them more effective and socially acceptable.
The paper by Ans Kolk and Rob van Tulder on “Setting global
rules? TNCs and codes of conduct” focuses on historical aspects
of code development and implementation. The authors suggest that
codes of conduct can be seen as an expression of corporate social
responsibility, but also as rule-setting behavior – attempts to help
fill some of the existing international institutional voids. Their paper
examines trends in the adoption and contents of codes of conduct
introduced to regulate the behavior of international business.
Specific emphasis is placed on the current state of international
social responsibility codes, their effectiveness and perspectives for
future development.
John Kline’s paper on “TNC codes and national sovereignty:
deciding when TNCs should engage in political activity” examines
the role of TNCs in the formulation and implementation of the
political agenda in the countries of production. The author states
that when governments decline to intervene in another country’s
affairs, TNCs can be thrust into the breach between emerging
international standards and national political sovereignty, using
corporate economic capabilities to influence political change.
According to Kline, codes of conduct for TNCs largely ignore the
dilemmas presented by increasing pressures on TNCs to engage in
political activities that support human rights objectives in foreign
countries. The author offers a conceptual “connection continuum”
as a taxonomic device to help identify and evaluate key factors
that determine the nature and degree of a TNC’s responsibility to
undertake such political involvement. Ranging from TNCs as
proximate causal agents to distantly unaware yet potentially capable
actors, the continuum concept provides a way to develop and apply
TNC conduct standards that weighs possible corporate complicity
in human rights violations with the desire to restrict TNC
interference in a country’s domestic political affairs.
ix
The third paper by S. Prakash Sethi on “Effectiveness of
industry-based codes in serving public interest: the case of the
International Council on Mining and Metals (ICMM)” undertakes
a detailed analysis of one industry’s voluntary code of conduct.
The industry in question is the mining industry, which is under
heavy pressure for its operational practices that are considered
harmful to the environment. There are also issues of questionable
practices involving potential human rights abuses. Thus, industry
leaders have the most incentive to take effective voluntary measures
to forestall further regulation at the national and international level.
And yet, as the paper shows, the industry has failed to use this
opportunity. The author offers an analytical framework within which
to evaluate the relative effectiveness of industry-based principles
or codes of conduct. It analyzes the ICMM’s Sustainable
Development Framework and its adequacy in terms of what the
industry group aims to accomplish, and further actions that might
be needed to address unresolved issues in order to engender public
trust and confidence in the industry’s actions and assertions in
meeting societal expectations.1
The help of Karl P. Sauvant and Joerg Weber in the
preparation of this special issue is acknowledged. Also the
comments of several anonymous referees proved to be extremely
helpful.
S. Prakash Sethi
1 The readers of this special issue should note that ICCA is planning
to hold its 2nd International Conference in June 24-28, 2007. The general
theme of the conference is “Globalization and the Good Corporation.”
Readers are invited to contact ICCA with their ideas and suggestions for the
conference at 1 Bernard Baruch Way, J1034, New York, NY 10010. Updates
on the next conference would be posted on ICCA’s website: www.ICCA-
CorporateAccountability.org. Email address: oemelianova@ICCA-
CorporateAccountability.org.
x
Setting new global rules?
TNCs and codes of conduct
Introduction
pan
Internati
m
onal
Co
o rga
ni zat
ion
s
Os s
NG BSG
A cascade of codes
Address special needs 1) Carry out activities in harmony with development priorities, and social aims Ranging from:
and structure of the host country (general policy objectives) 0 out of 2, to 2
C 2) Obey national laws and regulations out of 2
O
N Dynamic comparative 1) Adopt/develop technology to the needs of host countries Ranging from:
T advantage 2) Invest in high-productivity, high-technology, knowledge-based activities 0 out of 4, to 4
E 3) Establish backward linkages with domestic companies out of 4
X 4) Give consideration to conclude contracts with national companies
T Training 1) Provide training for employees at all levels which develops useful skills and Ranging from:
promotes career opportunities 0 out of 3, to 3
I 2) Participate in training programmes organised by/together with governments out of 3
S 3) Make services of skilled personnel available to assist in training
S programmes
U
E Monitoring 1) Foster and strengthen local capacities to monitor poverty reduction Ranging from:
S programmes (participatory methods) 0 out of 3, to 3
2) Encourage the development of local poverty reduction indicators and out of 3
targets
3) Design poverty monitoring systems which provide evaluations of anti-
poverty programmes
NO
NO
Position 3 Position 4
References
John M. Kline*
Causal Dis-
actor connected
actor
Direct Beneficial Silent
Source: author.
Conclusions
References
Sullivan, Rory (ed.) (2003). Business and Human Rights (Sheffield, UK:
Greenleaf Publishing).
________ and Nina Seppala (2003). “From the inside looking out: a
management perspective on human rights”, in Rory Sullivan (ed.),
Business and Human Rights, pp. 102-112.
van der Putin, Frans-Paul, Gemma Crijns and Harry Hummels (2003). “The
ability of corporations to protect human rights in developing countries”,
in Rory Sullivan (ed.), Business and Human Rights, pp. 82-91.
Wax, Emily (2004). “Oil wealth trickles into Chad, but little trickles down”,
The Washington Post, 13 March 2004, p. A16.
White, David (2004). “Shell tries to repair troubled Delta relations”, The
Financial Times, 24 February 2004, p. 5.
S. Prakash Sethi*
2002.
4 See, for example, Collingsworth 2002; and Oil & Gas Journal 2000.
5 See, for example, Cockburn 2003; Simpson 2005; and Matlack,
AMRO Bank, Banco Bradesco, Banco do Brasil, Banco Itaú, Banco Itaú
BBA, Bank of America, Barclays plc, BBVA, Calyon, CIBC, Citigroup Inc.,
Credit Suisse Group, Dexia Group, Dresdner Bank, EKF, HSBC Group,
HVB Group, ING Group, JPMorgan Chase, KBC, Manulife, MCC, Mizuho
Corporate Bank, Rabobank Group, Royal Bank of Canada, Scotiabank,
Standard Chartered Bank, The Royal Bank of Scotland, Unibanco, WestLB
AG, Westpac Banking Corporation. For details, see www.equator-
principles.com.
13 See Annandale, Morrison-Saunders and Bouma 2004; Kolk 2003
and 1999; Peck and Sinding 2003; and Marshall and Brown 2003.
gmi.php.
Morgan and Douglas Yearley, played a leadership role in creating the project.
18 For details on MMSD’s governance and organization structure
see http://www.iied.org/mmsd/governance.html.
19 For details see the “Stakeholder Engagement” page of the MMSD
mmsd/wp/index.html
Trahar, Chief Executive Officer, Anglo American plc.; Bobby Godsell, Chief
Executive Officer, AngloGold Ashanti; Charles (Chip) Goodyear, Chief
Executive Officer, BHP Billiton; Wayne Murdy, President & Chief Executive
Officer, Newmont Mining Corporation; Kazuo Oki, President and
Representative Director, Nippon Mining and Metals; Andrew Michelmore,
Chief Executive Officer, WMC Limited; and Leigh Clifford, Chief Executive,
Rio Tinto plc.
Corporate Governance
Principle 1: Implement and maintain ethical business practices and sound
systems of corporate governance.
Corporate Decision-Making
Principle 2: Integrate sustainable development considerations within the
corporate decision-making process.
Human Rights
Principle 3: Uphold fundamental human rights and respect cultures, customs
and values in dealings with employees and others who are affected by our
activities.
Risk Management
Principle 4: Implement risk management strategies based on valid data and
sound science.
Health and Safety
Principle 5: Seek continual improvement of our health and safety
performance.
Environment
Principle 6: Seek continual improvement of our environmental performance.
Biodiversity
Principle 7: Contribute to conservation of biodiversity and integrated
approaches to land use planning.
Material Stewardship
Principle 8: Facilitate and encourage responsible product design, use, re-
use, recycling and disposal of our products.
Community Development
Principle 9: Contribute to the social, economic and institutional development
of the communities in which we operate.
Independent Verification
Principle 10: Implement effective and transparent engagement,
communication and independently verified reporting arrangements with our
stakeholders.
27
For the complete list of amplifications of the ICMM SD
Framework principles, see www.icmm.com.
Russell 2005; Bhat and Bhatta 2004; Thomassin and Cloutier 2004; Alfaro
and Rodriguez-Clare 2004; Herve 1990; Dybvig and Spatt 1983; Nason 1989;
Quiggin and Chambers 1998.
A. Governance structure
***
45 See United States Department of State Web Site for Voluntary
102
(Billions of dollars and per cent)
Developed economies 256.2 849.1 1 134.3 596.3 547.8 442.2 380.0 353.3 1 014.1 1 092.7 662.2 599.9 577.3 637.4
Europe 147.3 520.4 722.8 393.9 427.6 359.4 223.4 218.1 763.5 866.1 451.3 396.9 390.0 309.5
European Union 140.3 501.5 696.3 382.6 420.4 338.7 216.4 200.8 724.6 813.4 433.9 384.5 372.4 279.8
United States 86.1 283.4 314.0 159.5 71.3 56.8 95.9 92.3 209.4 142.6 124.9 134.9 119.4 229.3
Japan 1.3 12.7 8.3 6.2 9.2 6.3 7.8 21.4 22.7 31.6 38.3 32.3 28.8 31.0
Other developed countries 21.5 32.5 89.2 36.7 39.6 19.6 52.9 21.5 18.5 52.5 47.7 35.8 39.1 67.6
Developing economies 138.9 232.5 253.2 217.8 155.5 166.3 233.2 56.6 88.2 143.2 78.6 47.8 29.0 83.2
Africa 7.1 11.9 9.6 20.0 13.0 18.0 18.1 2.3 2.5 1.6 - 2.6 0.4 1.2 2.8
Latin America and the Caribbean 47.9 108.6 97.5 89.1 50.5 46.9 67.5 12.7 44.7 60.6 29.1 11.4 10.6 10.9
Asia and Oceania 83.9 112.0 146.0 108.7 92.0 101.4 147.6 41.6 41.0 81.1 52.0 36.0 17.2 69.4
Asia 83.4 111.6 145.7 108.6 92.0 101.3 147.5 41.6 41.1 81.1 52.0 36.0 17.2 69.4
West Asia 3.5 1.9 3.8 7.1 5.7 6.5 9.8 0.2 1.6 1.4 1.1 0.9 - 4.0 0.0
East Asia 51.6 77.3 116.2 78.7 67.3 72.1 105.0 31.7 29.8 72.0 26.1 27.6 14.4 53.5
China 38.5 40.3 40.7 46.9 52.7 53.5 60.6 2.6 1.8 0.9 6.9 2.5 - 0.2 1.8
South Asia 2.9 3.1 3.1 4.1 4.5 5.3 7.0 0.1 0.1 0.5 1.4 1.1 1.0 2.3
South-East Asia 25.3 29.3 22.6 18.8 14.5 17.4 25.7 9.6 9.6 7.2 23.3 6.4 5.8 13.6
Oceania 0.4 0.4 0.3 0.1 0.0 0.1 0.1 0.0 - 0.1 0.0 0.1 0.0 0.0 0.0
South-East Europe and the CIS 6.6 10.5 9.1 11.8 12.8 24.1 34.9 1.3 2.6 3.2 2.7 4.5 10.6 9.7
South-East Europe 1.6 3.7 3.6 4.5 3.8 8.4 10.8 0.1 0.1 0.0 0.2 0.6 0.1 0.2
CIS 5.0 6.8 5.5 7.3 9.0 15.7 24.1 1.3 2.5 3.2 2.5 3.9 10.4 9.5
World 401.7 1 092.1 1 396.5 825.9 716.1 632.6 648.1 411.2 1 104.9 1 239.1 743.5 652.2 616.9 730.3
Memorandum: share in world FDI flows
Developed economies 63.8 77.7 81.2 72.2 76.5 69.9 58.6 85.9 91.8 88.2 89.1 92.0 93.6 87.3
Developing economies 34.6 21.3 18.1 26.4 21.7 26.3 36.0 13.8 8.0 11.6 10.6 7.3 4.7 11.4
South-East Europe and the CIS 1.6 1.0 0.6 1.4 1.8 3.8 5.4 0.3 0.2 0.3 0.4 0.7 1.7 1.3
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, annex table B.1.
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, annex table B.1.
a Ranked on the basis of the magnitude of 2004 FDI flows.
103
competitive pressures in many industries are leading firms to
explore new ways of improving their competitiveness. Some of
these ways are by expanding operations in the fast-growing
markets of emerging economies to boost sales, and by
rationalizing production activities with a view to reaping
economies of scale and lowering production costs. Higher prices
for many commodities have further stimulated FDI to countries
that are rich in natural resources such as oil and minerals. In
some developed as well as developing countries, increased
inflows in 2004 were linked to an upturn in cross-border merger
and acquisition (M&A) activity. Greenfield FDI continued to
rise for the third consecutive year in 2004. Provided economic
growth is maintained, the prospects for a further increase in
global FDI flows in 2005 are promising.
FDI inflows 59 208 633 648 22.8 21.2 39.7 -40.9 -13.3 -11.7 2.5
FDI outflows 27 239 617 730 25.4 16.4 36.3 -40.0 -12.3 -5.4 18.4
FDI inward stock 628 1 769 7 987 8 902 16.9 9.5 17.3 7.1 8.2 19.1 11.5
FDI outward stock 601 1 785 8 731 9 732 18.0 9.1 17.4 6.8 11.0 19.8 11.5
Cross-border M&As a .. 151 297 381 25.9 b 24.0 51.5 -48.1 -37.8 -19.6 28.2
Sales of foreign affiliates 2 765 5 727 16 963 c 18 677 c 15.9 10.6 8.7 -3.0 14.6 18.8 c 10.1 c
Gross product of foreign affiliates 647 1 476 3 573 d 3 911 d 17.4 5.3 7.7 -7.1 5.7 d 28.4 d 9.5
Total assets of foreign affiliates 2 113 5 937 32 186 e 36 008 e 18.1 12.2 19.4 -5.7 41.1 e 3.0 e 11.9 e
Exports of foreign affiliates 730 1 498 3 073 f 3 690 f 22.1 7.1 4.8 -3.3 f 4.9 f 16.1 f 20.1 f
Employment of foreign affiliates (thousands) 19 579 24 471 53 196 g 57 394 g 5.4 2.3 9.4 -3.1 10.8 g 11.1 g 7.9 g
GDP (in current prices) h 11 758 22 610 36 327 40 671 10.1 5.2 1.3 -0.8 3.9 12.1 12.0
Gross fixed capital formation 2 398 4 905 7 853 8 869 12.6 5.6 1.6 -3.0 0.5 12.9 12.9
Royalties and licence fee receipts 9 30 93 98 21.2 14.3 8.0 -2.9 7.5 12.4 5.0
Exports of goods and non-factor services h 2 247 4 261 9 216 11 069 12.7 8.7 3.6 -3.3 4.9 16.1 20.1
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, table I.3.
a Data are only available from 1987 onward.
b 1987-1990 only.
c Based on the following regression result of sales against FDI inward stock (in millions of dollars) for the period 1980-2002:
Sales=2 003.858+1.87288*FDI inward stock.
d Based on the following regression result of gross product against FDI inward stock (in millions of dollars) for the period 1982-2002:
105
552.15+4.587846*FDI inward stock.
h Based on data from the International Monetary Fund, World Economic Outlook, April 2005.
Table 3. The world’s top 25 non-financial TNCs, ranked by foreign assets, 2003 a
106
(Millions of dollars and number of employees)
1 77 37 General Electric United States Electrical & electronic equip. 258 900 647 483 54 086 134 187 150 000 305 000 43.2 1068 1398 76.39
2 7 95 Vodafone Group Plc United Kingdom Telecommunications 243 839 262 581 50 070 59 893 47 473 60 109 85.1 71 201 35.32
3 72 12 Ford Motor Company United States Motor vehicles 173 882 304 594 60 761 164 196 138 663 327 531 45.5 524 623 84.11
4 90 65 General Motors United States Motor vehicles 15 4466 448 507 51 627 185 524 104 000 294 000 32.5 177 297 59.60
5 10 78 British Petroleum Co. Plc United Kingdom Petroleum expl./ref./distr. 141 551 177 572 192 875 232 571 86 650 103 700 82.1 60 117 51.28
6 31 41 ExxonMobil Corp. United States Petroleum expl./ref./distr. 116 853 174 278 166 926 237 054 53 748 88 300 66.1 218 294 74.15
7 22 80 Royal Dutch/Shell Group United Kingdom/
Netherlands Petroleum expl./ref./distr. 112 587 168 091 129 864 201 728 100 000 119 000 71.8 454 929 48.87
8 68 94 Toyota Motor Corp. Japan Motor vehicles 94 164 189 503 87 353 149 179 89 314 264 410 47.3 124 330 37.58
9 16 48 Total France Petroleum expl./ref./distr. 87 840 100 989 94 710 118 117 60 931 110 783 74.1 419 602 69.60
10 62 69 France Telecom France Telecommunications 81 370 126 083 21 574 52 202 88 626 218 523 48.8 118 211 55.92
11 14 58 Suez France Electricity, gas and water 74 147 88 343 33 715 44 720 111 445 172 291 74.7 605 947 63.89
12 89 34 Electricite De France France Electricity, gas and water 67 069 185 527 16 062 50 699 51 847 167 309 32.9 204 264 77.27
13 80 63 E.On Germany Electricity, gas and water 64 033 141 260 18 659 52 330 29 651 69 383 41.2 478 790 60.51
14 85 74 Deutsche Telekom AG Germany Telecommunications 62 624 146 601 23 868 63 023 75 241 248 519 37.0 97 178 54.49
15 59 67 RWE Group Germany Electricity, gas and water 60 345 98 592 23 729 49 061 53 554 127 028 50.6 377 650 58.00
16 23 23 Hutchison Whampoa Ltd Hong Kong, China Diversified 59 141 80 340 10 800 18 699 104 529 126 250 71.4 1900 2350 80.85
17 32 40 Siemens AG Germany Electrical & electronic equip. 58 463 98 011 64 484 83 784 247 000 417 000 65.3 753 1011 74.48
18 53 46 Volkswagen Group Germany Motor vehicles 57 853 150 462 71 190 98 367 160 299 334 873 52.9 203 283 71.73
19 21 35 Honda Motor Co Ltd Japan Motor vehicles 53 113 77 766 54 199 70 408 93 006 131 600 72.0 102 133 76.69
20 34 89 Vivendi Universal France Diversified 52 421 69 360 15 764 28 761 32 348 49 617 65.2 106 238 44.54
21 42 83 ChevronTexaco Corp. United States Petroleum expl./ref./distr. 50 806 81 470 72 227 120 032 33 843 61 533 59.2 93 201 46.27
22 3 30 News Corporation Australia Media 50 803 55 317 17 772 19 086 35 604 38 500 92.5 213 269 79.18
23 65 29 Pfizer Inc United States Pharmaceuticals 48 960 116 775 18 344 45 188 73 200 122 000 47.5 73 92 79.35
24 93 85 Telecom Italia Spa Italy Telecommunications 46 047 101 172 6 816 34 819 14 910 93 187 27.0 33 73 45.21
25 50 18 BMW AG Germany Motor vehicles 44 948 71 958 35 014 47 000 26 086 104 342 54.0 129 157 82.17
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, annex table A.I.9.
a All data are based on the companies’ annual reports unless otherwise stated.
b Ranking among top 100 TNCs worldwide. TNI, the abbreviation for Transnationality Index, is calculated as the average of the following three ratios: foreign assets
to total assets, foreign sales to total sales and foreign employment to total employment.
c Ranking among top 100 TNCs worldwide. II, the abbreviation for Internationalization Index, is calculated as the number of foreign affiliates divided by the number
of all affiliates.
1 7 41 Hutchison Whampoa Limited Hong Kong, China Diversified 59 141 80 340 10 800 18 699 104 529 126 250 71.4 1900 2350 80.85
2 27 39 Singtel Ltd. Singapore Telecommunications 17 911 21 668 4 672 68 848 8 642 21 716 43.1 23 30 76.67
3 42 35 Petronas - Petroliam Nasional Bhd Malaysia Petroleum expl./ref./distr. 16 114 53 457 8 981 25 661 3 625 30 634 25.7 167 234 71.37
4 26 48 Samsung Electronics Co., Ltd. Republic of Korea Electrical & electronic equip. 2 387 56 524 41 362 54 349 19 026 55 397 44.1 80 89 89.89
5 12 36 Cemex S.A. Mexico Construction Materials 11 054 16 021 5 189 7 167 17 051 25 965 69.0 35 48 72.92
6 23 37 América Móvil Mexico Telecommunications 8 676 13 348 3 107 7 649 8 403 18 471 50.4 12 16 75.00
7 31 24 China Ocean Shipping (Group) Co. China Transport and storage 8 457 18 007 6 076 9 163 4 600 64 586 40.1 22 56 39.29
8 46 7 Petroleo Brasileiro S.A. - Petrobras Brazil Petroleum expl./ref./distr. 7 827 53 612 8 665 42 690 5 810 48 798 15.6 13 79 16.46
9 25 47 LG Electronics Inc. Republic of Korea Electrical & electronic equip. 7 118 20 173 14 443 29 846 36 268 63 951 46.8 134 151 88.74
10 16 34 Jardine Matheson Holdings Ltd Hong Kong, China Diversified 6 159 8 949 5 540 8 477 57 895 110 000 62.3 16 23 69.57
11 10 14 Sappi Limited South Africa Paper 4 887 6 203 3 287 4 299 9 454 16 939 70.4 115 456 25.22
12 33 45 Sasol Limited South Africa Industrial chemicals 4 226 10 536 5 033 9 722 5 643 31 150 36.7 21 25 84.00
13 50 30 China National Petroleum Corp. China Petroleum expl./ref./distr. 4 060 97 653 5 218 57 423 22 000 1 167 129 5.0 119 204 58.33
14 22 2 Capitaland Limited Singapore Real estate 3 936 10 316 1 449 2 252 5 033 10 175 50.7 2 61 3.28
15 8 43 City Developments Limited Singapore Hotels 3 879 7 329 703 930 11 549 13 703 70.9 228 275 82.91
16 4 49 Shangri-La Asia Limited Hong Kong, China Hotels and motels 3 672 4 743 436 542 12 619 16 300 78.4 29 31 93.55
17 15 33 Citic Pacific Ltd. Hong Kong, China Diversified 3 574 7 167 2 409 3 372 8 045 12 174 62.5 2 3 66.67
18 45 16 CLP Holdings Hong Kong, China Electricity, gas and water 3 564 9 780 298 3 639 488 4 705 18.3 3 11 27.27
19 41 21 China State Construction Engineering Corp. China Construction 3 417 9 677 2 716 9 134 17 051 121 549 26.4 28 75 37.33
20 24 22 MTN Group Limited South Africa Telecommunications 3 374 4 819 1 308 3 595 2 601 6 063 49.8 6 16 37.50
21 2 26 Asia Food & Properties Singapore Food & beverages 3 331 3 537 1 232 1 273 32 295 41 800 89.4 2 4 50.00
22 11 46 Flextronics International Ltd. Singapore Electrical & electronic equip. 3 206 5 634 4 674 8 340 80 091 82 000 70.2 92 106 86.79
23 30 17 Companhia Vale do Rio Doce Brazil Mining & quarrying 3 155 11 434 6 513 7 001 224 29 632 40.5 16 55 29.09
24 29 10 YTL Corp. Berhad Malaysia Utilities 2 878 6 248 489 1 060 1 518 4 895 41.1 24 115 20.87
25 20 38 Hon Hai Precision Industries Taiwan Province
of China Electrical & electronic equip. 2 597 6 032 4 038 10 793 78 575 93 109 54.9 25 33 75.76
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, annex table A.I.10.
107
The pace at which the top 100 TNCs are expanding
internationally appears to have slowed down. Although their
sales, employment and assets abroad all rose in absolute terms
in 2003, their relative importance declined somewhat as
activities in the home countries expanded faster. Japanese and
United States TNCs are generally less transnationalized than
their European counterparts. The top 50 TNCs based in
developing economies (table 4), with a shorter history of outward
expansion, are even less transnationalized, but the gap between
TNCs from developed and developing countries is shrinking in
this respect.
Item 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, table I.14.
a Includes liberalizing changes or changes aimed at strengthening market functioning, as well as increased incentives.
b Includes changes aimed at increasing control, as well as reducing incentives.
112
(Billions of dollars)
600 600
2003
2003
500 500
2004
2004
400 400
300 300
Developing Developing
countries countries
200 200
100 100
0 0
Developed Africa Asia and Latin South-East Developed Africa Asia and Latin South-East
countries Oceania America Europe countries Oceania America Europe
and the and CIS and the and CIS
Caribbean Caribbean
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, figure II.1.
Spain 6.8
Belgium 5.5
Finland 4.5
Austria 4.5
Denmark 4.3
0 1 2 3 4 5 6 7 8
TNCs Countries
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the
Internationalization of R&D, figure IV.1.
Ireland 72.1
Hungary 62.5
Singapore 59.8
Brazil 47.9
Czech Republic 46.6
Sweden 45.3
United Kingdom 45.0
Australia (1999) 41.1
Canada 34.8
Italy (2001) 33.0
Mexico (2001) 32.5
Portugal (2001) 30.9
Thailand 28.1
Spain 27.3
Netherlands (2001) 24.7
China 23.7
Argentina (2002) 23.2
Germany (2001) 22.1
Israel (2001) 20.7
France (2002) 19.4
Poland 19.1
Slovakia 19.0
Average (2002) 15.9
Finland (2002) 15.0
United States (2002) 14.1
Turkey (2000) 10.6
Greece (1999) 4.5
Chile (2002) 3.6
India (1999) 3.4
Japan (2001) 3.4
Korea, Rep. of (2002) 1.6
0 25 50 75
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the
Internationalization of R&D, figure IV.5.
Note: In Argentina, Chile, Israel, theRepublic of Korea and Mexico, the R&D expenditure of
United States-owned affiliates has been used as a proxy for the R&D spending of all
foreign affiliates. In India, the share of foreign affiliates in total R&D spending has
been used as a proxy for their share in business R&D spending.
0 10 20 30 40 50 60
Developed countries
Developing economies
South-East Europe and CIS
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the
Internationalization of R&D, figure IV.8.
India 29.4
Japan 14.7
France 8.8
Germany 5.9
Canada 4.4
Singapore 4.4
Belgium 2.9
Italy 2.9
Malaysia 2.9
Thailand 2.9
Australia 1.5
Brazil 1.5
Ireland 1.5
Israel 1.5
Mexico 1.5
Morocco 1.5
Norway 1.5
Poland 1.5
Romania 1.5
Spain 1.5
Sweden 1.5
Tunisia 1.5
Turkey 1.5
0 10 20 30 40 50 60
Developed countries
Developing economies
South-East Europe and CIS
Source: UNCTAD, World Investment Report 2005: Transnational Corporations and the
Internationalization of R&D, figure IV.11.
Simona Iammarino
SPRU (Science and Technology Policy Research)
University of Sussex
United Kingdom
References
Birkinshaw, J. (1996). “How multinational susbsidiaries mandates are gained
and lost”, Journal of International Business Studies, 27, 3, pp. 467-
496.
Cantwell, J.A. (1992). “The internationalisation of technological activity
and its implications for competitiveness”, in O. Granstrand, L. Håkanson
and S. Sjölander, eds., Technology Management and International
Business. Internationalisation of R&D and Technology (Chichester:
Wiley).
Cantwell, J.A. (1989). Technological Innovation and Multinational
Corporations (Oxford: Basil Blackwell).
Charlotte H. Brink
(Aldershot, Ashgate, 2004), 200 pages
Matthias Busse
HWWA – Hamburg Institute of International Economics
Germany
William L. Megginson
(Oxford, Oxford University Press, 2005), 522 pages
The book begins with a brief history of the rise and fall of
State ownership in order to enable the reader to understand better
the actual economic rationale and need for privatization policy.
In the starting chapter, “The scope of privatization”, the author
attempts to answer several crucial questions associated with the
privatization process, such as why have so many countries
adopted privatization programmes?; what are the costs and
benefits of State versus public ownership, both in theory and in
practice?; how do governments privatize State-owned
enterprises (SOEs)?; how much privatization has actually
occurred?; and most importantly, has privatization worked as
an economic tool and accomplished its goals?.
Nevenka Cuckovic
Senior Research Fellow
Institute for International Relations Zagreb, Croatia
165
RECENT TRENDS IN INTERNATIONAL INVESTMENT AGREEMENTS: NEW UNCTAD RESEARCH NOTE 31/08/05 UNCTAD/PRESS/EB/2005/004
Books received since August 2005
I. Manuscript preparation
Dear Reader,
Sincerely yours,
Anne Miroux
Acting Editor
Transnational Corporations
Excellent Adequate
Good Poor
6. Please indicate the three things you liked most about Transnational Corporations:
If not, would you like to become one ($45 per year)? Yes No
Please use the subscription form on p. 175).
Name
Title
Organization
Address
Country
Let us know of any changes that might affect your receipt of Transnational
Corporations. Please fill in the new information.
Name
Title
Organization
Address
Country